A useful post here from another bubbular location: Southern California (SoCal, for short).
What can happen there can happen here, too. The post is quite good on the accelerated effects of information flow about housing, and the relationship between credit card debt and higher mortgage payments as fixed-rate or sweetheart deals reset to mrket levels.
In the '80's, Muldoon borrowed and hoped. We have lived through what it took to get us out of that hole: the best part of 20 years of work and better productivity.
And now, two aspects of the zeitgeist are putting us back in a similar hole:
1 - a Gummint hell-bent on buying enough votes for the next election, via various income redistribution schemes. Personal Tax cuts? Nah, Nanny knows best, you lot will simply add demand to the economy if we let you actually keep your own money. Speak for yourself, Michael bloody Cullen: I would pay down what minor debt I may have, and put the rest into Aussie shares and another super fund.
H L Mencken had it right in the '20's: an election is 'an advanced auction of stolen goods'.
And we are about to find out the hard way, yet again, that you cannot redistribute yourself rich.
2 - There is undoubtedly a local housing bubble. When it corrects, from a point where house price to income levels are around 5-7 i.e. unsustainable, to a level of say 4, look out below. 4/5 is $100,000 on a $500,000 home: a $100K loss. But 4/7 is $300,000 on a $700,000 home, and there's plenty of those just along my own street. So if you are one of the Feckless Many who have ratcheted up their debt anywhere north of 75% of current house valuation, you're gonna be hurting soon.
In effect, in the '80's, Muldoon borrowed and hoped at a public-sector level.
But in the aughties, borrowing and hoping is a private-sector pursuit.
And as the poster points out, in an environment where news and sentiment get around at the speed of light, that 'when', as in when the correction happens, might be a lot sooner than you would like.
SoCal catches the flu, we all cough.